AFF Sentinel Vol.6#3

Resurrecting the Death Tax a Top Priority

Even before inauguration, President-elect Obama and Democratic leaders revealed a top priority will be keeping family farmers, ranchers and small businessmen from passing their operations on to their children, the Wall Street Journal reports.

The leadership plans to act quickly, as the death tax that's been phasing out reaches zero by 2010.* Without some action, the tax will go back to the previous 55 percent rate in 2011. The Senate Finance Committee is expected to move soon and the president's February budget will include a death tax "preservation plan."

This contradicts campaign sympathy for family farms and acknowledging small business job creation. Evidently, the need for money to redistribute trumps concern for family farms. The definition of "family" farms might also differ. Obama has admired concepts converting U.S. agriculture into small, cottage farmers marketing in local farmers markets, no longer shipping food long distances or exporting it (see AFF Sentinel V5# 45**).

The Journal noted Obama's campaign plan called for exemptions of only $3.5 million per parent or $7 million for couples and taking 45% of the rest. Given today's valuations for land, livestock, equipment, capital reserves and operating capital, even a minimal operation barely supporting one family would be hammered, especially if there was only one parent. If an operation had been built up to support parents and a couple sons or daughters, the operation could be destroyed under many proposed formulas. It amounts to war on the future of family farms - farmers' children.

With grass averaging $970 west of the Missouri (USDA 2008) and $3,828 in the East, the average person would calculate land value required for even a minimal 500-cow operation at $8.7 - 9.5 million, before livestock, equipment and capital. But tax experts warn the calculations are more complex than that. The valuation is affected by IRS' definition of the land's "best use," the "step up basis" subtracted, the tax rate and - if we're lucky in the future - adding inflation indexing. The devil is in the details - definitions and equations politicians love to manipulate -- creating a minefield for families planning years in advance.

The left considers the death tax a tax "break" for the "rich," ignorant of the capital required to make a living from agriculture today. The death tax unfairly targets families taking the risk to put food on the world's tables. Agriculture, like small business, requires capital invested where working for wages doesn't. It is capital and farm families' efforts that efficiently produce our food and products for export, while utilizing and nurturing natural resources.

The Congressional tax wolves scream "lost" tax revenue. They ignore the families and capital eliminated from the economy, strangling future growth. The Wall Street Journal noted a 2006 Joint Economic Committee study estimated the death tax has wiped out $847 billion in capital. (Many jobs lost there.) The Journal noted that's roughly the same as the stimulus package being proposed to create jobs ("Estates of Pain," 01/13/09).

A former Congressional Budget Office director, Douglas Holtz-Eakin, estimates the 45 percent death tax rate would cost the economy 1.3 million jobs, the Journal said. The U.S. has the third highest estate tax in the world (American Council for Capital Formation).

The long-term effect? Breaking American agriculture into subsistence farms that cannot afford efficient equipment; better risk management to weather downturns; growth to keep kids on the farm and volume pricing on inputs or outputs. For the consumer/taxpayer, that means more uncertain food supplies and higher food costs.

Ultimately, it means a European-style agriculture, with large direct government payments to ten times as many "subsistence" farm families and agriculture with a declining output.

Death tax proponents only see tax revenue, not principles or implications. A campaigning Joe Biden bristled when a newsperson commented on campaign proposals:

BARBARA WEST (WFTV-Orlando): You may recognize this famous quote, "from each according to his abilities, to each according to his needs." That's from Karl Marx. How is Sen. Obama not being a Marxist if he intends to spread the wealth around?

BIDEN: Are you joking? Is this a joke? ... Or is that a real question?

Their attitude: It's not your family's money, it's the government's - it was just letting you use and increase it. The government's job: take your money from your kids and grandkids and "redistribute" it to someone else's kids.

The last time the Senate considered death tax repeal, liberal Senators*** from agricultural states voted against considering repeal. This time, will they and others defend successful family farms and ranches from the tax wolves in Congress?

* "Obama Plans to Keep Estate Tax," Wall Street Journal, 01/12/09

**Sen. V5#45, "Obama Embraces Radical Destruction of Food System," 11/3/08.

*** Senator farm state list voting against even considering repeal (2006): Harkin, Ia.; Conrad & Dorgan, ND; Johnson, SD; Pryor, AR; Bayh, IN; Bingaman, NM. Also, Salazar, CO, now Interior Secretary. Other senators voting likewise: Kennedy, Kerry, Boxer, Feinstein, Durbin, Obama, Reid, Leahy, Finegold and Byrd.

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